People have begun to look forward to the state stimulus checks in the absence of any more relief payments from the federal administration. With high inflation making life unbearable for low and moderate-income families and individuals, some form of support appears necessary at this stage. But the Biden administration doesn’t have the necessary numbers in both houses of Congress to push through a bill on their own.
The opposition Republicans have sought to put a large part of the blame for inflation on the third stimulus check, the Economic Impact Payment, which was part of the American Rescue Plan Act signed immediately by the new President in March 2021. Within days thousands of people started receiving the $1,400 stimulus check as individuals. Families with 2 dependents got as much as $5,600.
The well-intentioned federal payments contributed to the inflation to some extent. The first COVID-19-related stimulus check was issued in April 2020 immediately after the government was forced to order a shutdown to contain the pandemic in the initial stages.
The Trump administration dithered over the issue and ignored demands by medical experts to declare a pandemic as early as February 2020. This made the problem more acute and the government had to take emergency action to prevent a crisis at that stage.
The CARES Act gave eligible Americans a stimulus check of $1,200 which helped people immensely. Millions were able to cope with the sudden loss of income as industries across all sectors shut down. Two more stimulus checks were distributed, the second in December 2020 gave individuals $600 each while the third was the most generous.
Immediately after coming to power President Joe Biden signed the American Rescue Plan Act that gave eligible American a stimulus check of $1,400.
Third Stimulus Check Led To A Spike In The Demand For Goods
The third stimulus check came soon after the second payment, declared in December 2020. People suddenly had sufficient cash with them to even pay off their debts and set aside a substantial part as savings.
This spurt in cash led to a sudden increase in demand for goods, way more than an economy affected by supply issues could muster. This led to an imbalance in demand and supply leading to a shortage of goods. This increased the price of goods and contributed in part to the shortage for a brief period.
The present economic environment is different from what it was during the pandemic. The unemployment rate had soared to 14.7% in April 2020, immediately after the pandemic first hit America.
But it has gone down to 3.6% thanks to a booming economy in the last two quarters of 2021. But inflation has zoomed to a 40-year-high. There is a warning of recession hitting hard while the prices of gas, other essential items, rent, and utilities have rushed to nearly unaffordable levels and have hovered there for months.
State Move In With Stimulus Checks To Help Inflation-Hit Residents
For the first time inflation threatens to move into double digits as it crossed 9.1% in June 2021. The opposition Republicans and a section of experts have blamed the inflation on the third round of the stimulus checks and now with the states giving out more money, the worry is on top of the mind of policymakers and the public alike.
Some conservative economists say that it is wrong to give out these stimulus checks to the public, especially after a big sum has already been given in the past two years. They say it will make inflation worse and cause more trouble for people instead of helping them.
Some State Stimulus Checks
Here are some stimulus checks and the impact they may have on states. California is the latest among states to declare an inflation relief payment with Governor Gavin Newsom confirming the signing of a state budget. The state stimulus check will provide direct refunds in taxes of up to $1,050 for around 23M Californians.
The goal of the stimulus check is to battle the high inflation that has hit residents hard. A piece of news released by Gov. Gavin Newsom’s office has said that rising costs and global inflation has hit residents hard and the state government realizes that people need support at this stage.
California is helped along in its decision by the huge trade surplus it enjoys. The governor’s budget will show a $75.7B general fund surplus across the last two fiscal years.
Oregon also announced in June that it would go ahead and distribute a one-off payment worth $600 to over 236,000 residents who were beneficiaries of the Earned Income Tax Credit on their income tax form 2020.
Colorado Governor Jared Polis has announced that residents would receive a $750 check for individuals and double that for married couples who file jointly.
The governor said that all residents of Colorado were feeling the adverse impact of rising costs. He said that he could not sit on taxpayers’ money when a part of it could make life easier for a considerable section of residents.
Other states that have moved in to help out their residents include Delaware, Idaho, Georgia, Illinois, Maine, Indiana, New Jersey, South Carolina, New Mexico, and Virginia.
Will The Inflation Situation Worsen After The State Stimulus Checks
The federal checks were undoubtedly just what was needed at that moment to save people from certain starvation, high debts, and homelessness. Many people for the first time were successful in bringing down high-interest credit card debts and buoying their savings.
But it was bound to have some negative long-term effects on the economy. While money in people’s hands saved the country from a severe recession, it also led to a demand-supply gap and increased the price of goods, especially gasoline and other essential items.
The present rise in inflation is turning out to be the worst that we have seen in a generation, and it will have certain consequences for the dollar’s value and the financial stability of the US economy. With the federal stimulus checks behind us, it appears that it raised inflation by 3 percentage points by end-2021.
This is borne out by the high rate of inflation in America compared to other advanced economies. The state stimulus checks are more narrow in scope and limited to around a dozen states.
And it is obvious that stimulus checks are not the only reason and the supply issue and the war in Europe are to majorly blame for the economic mess that the nation is in at the moment.